2016-17 consultation information

Our Pricing Proposal for 2016-17 is now in place and covers what we are charging for the use of regional Queensland's electricity network in 2016-17. It aligns with our 2017-2020 Tariff Structure Statement submitted to the Australian Energy Regulator (AER) in November 2015.

The reforms that have led to the Pricing Proposal have been all about delivering better prices and greater choice and control for customers.

Tariff guides

The following documents provide a guide to the network tariffs for each customer group for 2016-17. Some changes have been made through the consultation process from our initial proposals.

Please note: The excess kVAr charge to CAC Customers has been deferred to 1 July 2017

Our Pricing Proposal

Our 2016-17 Pricing Proposal has been approved by the Australian Energy Regulator.

Webinars on our future pricing

We held a series of stakeholder webinars on our Pricing Proposal in May 2016.

The webinars recap on our tariff reform journey and our forecast revenue requirements - the 'dollars' we pass through in our tariffs. They then look at proposed tariff structures, rates and reforms for each customer group and the customer impacts.

The webinars below cover the Pricing Proposal information separately for the relevant customer groups. Updated slide presentations are available here.

Customers using less than 100MWh a year

Residential and Small Business: Standard Asset Customer - Small

You can view the slide presentation (PDF 3.0 mb) or the webinar below.

Note: The webinar recording has poor audio clarity for the last 10 minutes - the content is in these Questions and Answers (PDF 51.2 kb).

Transcript

SLIDE 1

Good afternoon everyone. Thank you so much for joining us for today’s webinar on Ergon Energy’s Pricing Proposal for 2016-17.

We have over 60 people registered so I can see the numbers actually increasing as we go through the introduction so that is excellent. Thank you all so much for giving us your time your time this afternoon.

Before we get started, I’ll just give you a quick overview of the webinars that we are holding this week.

We are covering our network tariffs for 2016-17 - which is just one component of the retail tariff or the retail bill.

And as the rates, structures and impact of our network tariffs are different for different customer groups we are hosting three different webinars. One today and two tomorrow.

This one will cover the relevant sections of our Pricing Proposal for 2016-17 for customers using LESS than 100MWh a year.  That’s our residential and small business customers, or small to medium business customers.

Tomorrow we will then have one for businesses using MORE than 100MWh a year, up to 4GWh.

And then later in the morning one for the state’s largest energy users, our customers using MORE than 4GWh a year.

My name is Sara Collins; if you have not attended one of these webinars before, and I’ll be facilitating today’s webinar. I am joined today by Ergon Energy’s Manager of Regulatory Determination and Pricing, Brendon Crown, whom you can see on the webcam as well. You’ll hear from Brendon shortly but I just have a few little houses keeping things to get through for those who have not participated in a webinar before.  Just so you know how it all works.

SLIDE 2

Basically you should have a panel as per the slide that you cannot see on the screen.

When you joined the webinar session that should have popped up.

That control panel can be used to control your session.

So if you look at the little red arrow you can either minimise it if is in the way of your presentation, you can use the small orange arrow to minimise it. And then just need to re-click the arrow to make it re-appear.

From that panel, you can control how you listen to this webinar. If you are having issues with your audio, which has happened once before, you can dial in via the telephone at any time just select the telephone option and calling the number provided.  Or in reversed, you can use your computer speakers or a headphone.

We have also activated our webcams, so you should be able to see me at the moment and later I will turn that off and you can see Brendon as he goes through the presentation.

For this webinar, you’re as participants will not be able to speak the microphones have been muted, so if you are talking don’t be concerned no one else, or there is other noise in the room, no one else will be able to hear you.

But you can ask questions of us during the presentations, simple type them into the Questions Panel, so there is a little Pane in there that you open up and just type the questions in.

We have a number of panellists helping Brendon today who can answer your questions as we go through. So I do encourage you to ask away… so that we can address any of the background information that you would benefit from.

We’ll also stop during the session just a couple of time to address questions, actually we’ll stop probably once during the session and then at the end we have some dedicated time as well.

If we are unable to answer questions we can certainly follow that up after the webinar.

During the session, we’ll also ask you a quick question or two through a couple of polls. These are just to let us know where we need to focus the conversation and help us gauge your perceptions.

As I mentioned as we were starting, we are recording today’s session so it will be accessible to anybody who has been unable to participate.

And we will make that available online. Just checking my list to see that I have all that covered.

SLIDE 3

And we will get started on today’s agenda. We have allowed approximately 40 minutes for the formal presentation and about 15 to 20 minutes for questions.

In terms of the agenda, we will start today with a bit if a recap of Ergon Energy’s tariff reform journey… then we’ll provide an overview of our forecast revenue requirements, which are effectively the ‘dollars’ we have allocated to customers through our Pricing Proposal.

We will look specifically at the impacts here for customers, as I mentioned, who use less than 100MWh per annum… that’s our residential customers and our small to medium businesses.

Then take a break to address your questions and after that we’ll discuss the detail of the new demand-based tariffs that we are introducing for the Standard Asset Customer Small group… which these are all about ensuring we can deliver choice to the tariffs that we are offering.

After that we’ll then close the session with time to take your questions.

Hopefully that covers everything I need to pass on before get started.

But before we do as I mentioned I will just open up the poll question so we can get a bit of an idea of anybody who is online.

POLL SLIDE

I just want to get a bit of perception of who has been involved in our conversation about it our tariff reforms… so I can do that now and you should be able to see it on the screen.

I can see the questions responses coming through.  Simply have you had:

– No exposure, until today

– Looked at material online. I should apologise there was an issue with the link in the invite that we sent out but I hope that did not hamper things there.

–  Have you attended a previous webinar/s

–  Or engaged with us face-to-face or one-on-one.

Okay I will close that off as most of you have voted.  Just for your information Brendon, a good 40% almost have attended previous webinars.  Thank you very much for that,

Okay I will hand you over now to Brendon.

SLIDE 4

Thank you Sara.

The 2016-17 year is an important year for Ergon Energy, at least from a pricing perspective.

It represents the culmination of one of the most substantial tariff reform agendas and journeys that any distribution entity has made over a three year period.

It’s worth reflecting how far we’ve come in these three years. In 2013 the tariffs we published (apart from the rates obviously) were not too different from the tariffs we would have published 15 years earlier.

And many of our stakeholders and customers had recognised we were well behind the rest of the pack. Acknowledging we needed to change, we also saw an opportunity for Ergon Energy to give customers greater visibility of the impact their use of the network has on cost.

Many of you have been on the journey with us, to make the substantial changes to the tariffs we offer customers, and most of these are now in place.

With the introduction of the Tariff Structure Statement, we have established the 2016-17 year as our foundation year.

What that means is that all of the major reforms that we have been progressing over a number of years are now will in place from 1 July 2016.

This does include some changes to structures and rates for some of our tariff classes compared to what was approved by the AER in 15-16 prices.  For those of you who have been on our previous webinars, we are not making any additional changes to those we outlined November last year when we released our Tariff Structure Statement.

Now with our foundation year firmly in place, we plan to keep our tariff structures relatively stable now out to 2020 to build a greater understanding of the new tariff options and promoting their benefits.

Now our focus today is on the white box on your screen.

Sara if you just move that on to the next one...

SLIDE 5

That is basically the network tariffs slide.

We are both a network business and a retailer and I want to focus today on the network part of the bill.

However, because the network part is a big chunk of the total bill, the way we structure our tariffs into different components (i.e. a fixed $ per day, cents per kWh, etc.) usually makes its way to the customer through the retail bill.

SLIDE 6

Now our customers are grouped based on electricity they use. And the structures, rates and impact of our network tariffs vary for each customer group.

The focus of today’s session is on the customers on the left – the vast majority customers in fact who use less than 100MWh of energy per annum.   About 86% of these are residential customers and the remaining 14% are small to medium businesses.

SLIDE 7

It is worth emphasising today the commitments we have made to customers in our Regulatory Proposal the five years to 2020.

Ergon Energy is committed to delivering the peace of mind intrinsic to a safe, dependable electricity service, and enabling greater customer choice and control by way of tariff options and how the network can be used… all for the best possible price.

The pace we have set for our journey has been all about balancing the short-term year on year impact on individual customers with the longer term community cost for everyone if the reforms are not implemented.

And this balancing act was difficult in the previous regulatory period to 2015 where there were constant increases in prices each year.

But, as many of you know, the Australian Energy Regulator or the AER released its preliminary determination in April last year for our revenue allowance out to 2020.

It set our costs for 2015-16 well below what were experienced in 2014-15. And the prices we published in our Pricing Proposal last year reflected the reduction in the dark blue bar representing Distribution Use of System charges.

Well what has happened since then?  Well in October last year, the AER substituted the April determination with several additional adjustments, including those to financing costs, and allowed expenditure forecasts. This, combined with revenue adjustments for under-recoveries in previous years, did increase the revenue we need to recover in 2016-17 prices by about 1.5% compared to 2015-16 prices.

Of course, the revenues we are allowed to recover in our final determination for 2016-17 are still well below what we were allowed to recover in 2014-15.

And I hope you can see this that in the graphic particularly to the left.

It is important to re-emphasise that our charges are only a proportion of a retail customers’ bill.  The blocks above the dark blue represent transmission, and solar costs. These aren’t costs for our services, and are largely outside of our control as a distributor.  We do pass them on through our Network Use of System charges and this is seeing some of our tariffs a little bit higher as a result. The higher transmission charges from Powerlink are around a 9% increase in 16-17. And this transmission cost impact will differ according to the customer group or tariff class you are in.

For residential and small business customers the impact of transmission costs is not as high. And we will I will see in our overall Network Use of System charges that the impact of transmission charges isn’t affecting them as much.

The good news around the corner from a transmission perspective is that the AER’s final determination for Powerlink is due to be made for 2017-18.

Powerlink have advised that charges passed through to us are likely to fall around 25% in 2017-18.  And hopefully if we get a good stream of warm overcast weather for the remainder of the year, we are also confident that we will slightly over-recover on what we were charging in 2015-16 and any over recovering needs to be passed back to customers through lower prices in 2017-18.

So you can see we are expecting an revenue recovery reduction for distribution and transmission charges of around 10% a year out, in that 2017-18 period, which should flow through to customers in prices.

And again it is worth reiterating that the impact of these prices will affect different customer groups in different ways. I’m sure many of you have been around long enough to know that you should not necessarily go out and buy the ‘boat’ with all the saving you are expected to make in 2017-18.  They are obviously subject to a number of changes but never the less ….the price projectory that we are seeing is positive in terms of benefits to customers from2017-18 onwards. If we could just move to the next slide Sara.

SLIDE 8

I should mention Brendon that on that survey 20% of the audience have not attended a webinar before or exposed to our tariff reforms so a big thank you to that group for joining us.

Sure.

Ah I’ll, just quickly work through the issues that we have as Ergon Energy the network business and the residential retail rates that most customers receive…

For Customers in Ergon Energy’s network, the majority benefit from prices that are not purely based on our underlying network tariffs.

That is because Queensland Government recognises the costs of supplying customers in regional Queensland will be higher and therefore provides subsidies to regional customers in Queensland.

Each year the Queensland Government delegates this task to Queensland Competition Authority – or the QCA. Many of you will be aware of the QCA they determine regulated retail electricity tariffs, the ‘notified prices’ that Ergon Energy Retail charges customers in regional Queensland.

Now while we do our best to assist in this process, the task of outworking this process of determining regulated retail tariffs is undertaken independently. The impact of our network tariffs on the regulated retail prices does vary for each customer group.

Importantly for the residential and small to medium business customers, who use less than 100MWh of electricity a year, the Uniform Tariff Policy generally requires regulated retail tariffs to reflect network charges in Queensland’s south-east.

So in other words, a residential customer in Quilpie has access to the same regulated price for electricity as the customer in Indooroopilly even though the costs to serve these customers are quite different. The government in effect pays the difference between what the customer in Quilpie should pay and what the customer does pay in its regulated price.

SLIDE 9

The rates for these tariffs for 2016-17 will be confirmed by the QCA later in the month. They will consider our Pricing Proposal, of course, as they finalise these rates for 2016-17.

Now I could spend the entire rest of today’s presentation on regulated retail tariffs, but I do not wish to it isn’t the intended focus. I have along my explanation and webinar included the QCA’s draft determination notified rates linked to our customer classes. But I do this for reference only.

The following graph here shows the Distribution Use of System charges passed on to the household’s retailer for an indicative retail customer.

You can see that it fell in 2015-16, and generally it is being maintained around 2014-15 levels out to 2020 with a slight dip in 2017-18.

Again this is for one typical customer to the extent that Ergon has typical customers.

The initiative of any particular customer will not exactly replicate our revenue. The actual impact will depend on a number of factors including assumed growth and consumption, impact of transmission and other factors.

Now those INDICATIVE BILL bars (dark grey) on the graph, they’re actually the customer’s Tariff 11 total charge. And you can see that they are lower and different to the stacked bars next to it.

Now as I noted earlier, the majority of residential customers in regional Queensland are on notified prices, which for the most part, are more reflective of Energex’s rates than ours.

It is important to emphasise this as – over the next few slides – you are likely to see different changes in our network rates that are going to be like what the indicative bill might be.

It can be complicated and where I can I am trying to show you the difference between what our network price are doing and what possibly the QCA draft determination is going to on a year on year basis.

And you can see this on the right side of this next table.

As you can see on the right of this screen.  In 2016-17, the QCA informs us that the typical Tariff 11 bill is expected to increase by less than 1%. Sara would you mind taking us to the next slide…

SLIDE 10

I just have some feedback that some are having some problems with the sound so it might just be movement that we have had.

Sure, I will come a bit closer to the microphone my apologies for that.  I hope that is better but if you can’t hear the sound please let Sara know and we’ll talk up or talk down as we need.

Now as you can see on the right hand side of this screen... the QCA informs us that the typical Tariff 11 bill is expected to increase by less than 1% based on the QCA’s Draft Determination.  You can also see a reduction in the fixed charges applied.

Obviously, the impact on individual customers will vary depending on their consumption. I understand that the QCA has indicated that customers with lower consumption than this typical Tariff 11 usage will either benefit from a decrease or smaller increase while higher consumption customers may face larger increases.

Now our Pricing Proposal focuses on the tariffs on the left which reflect our distribution network use of system charges as applied to our residential customers in the east pricing zone.  You can see that in the title of the top left.

We have three pricing zones and the prices for customers in the West and Mt Isa are available in our pricing proposal document on our website.

While not reflected in the regulated retail tariffs that Ergon Energy Retail offers customers,

our default tariff is in fact a three step inclining block structure or IBT, with the rate increasing with each step up in a customer’s consumption level above a certain threshold. This tariff was introduced in 2014 as a transitional step to better reflecting network costs (compared to flat energy based tariffs) without requiring metering changes at the premises.

Importantly, this tariff is passed on to Ergon Energy Retail and they then charge the Tariff 11 on the right, which is actually very different. These are the rates in the QCA’s draft determination.

I would like to draw your attention to the other tariffs relating to Tariff 12A and 14, they reflect our seasonal time of use energy or STOUe or seasonal time of use demand or STOUD rates.  They feed into Tariff 12A and 14.

These retail tariffs are the first small customer tariffs that reflect our network tariff structures.  Although the rates are they are use are equivalent of Energex’s costs.

Ergon Energy Network will continue to use these tariffs and the tariffs structures throughout the 2017 to 2020 period.

There has not been any changes to tariff structures for our IBT and seasonal time of use energy rates  from  2015-16.  There has been some changes based on your feedback to our seasonal time of use demand tariff, which was outlined in our Tariff Structure Statement and I will explain in some detail later. This graph shows the impact of our distribution use of system charges for residential customers between years.

SLIDE 11

As you’ll see by the green line the average impact is in line with the revenue increase from last year, approximately 2%

The blue line which shows the comparison to 2014-15 rates and it highlights that what we charge for the network continues to be lower than what we charged in the last regulatory control period.

You can see a little spike there at 1,000kWh consumption is in line with the introduction of a rate applicable to the first block band, previously this was zero.

Again it is important to note that this is very different to what the actual Tariff 11 retail tariff rates are.

SLIDE 12

The next slide that we have there Sara is the business equivalent.

You can see a fairly common thread, the QCA’s draft determination does suggest that typical customers on the main small business tariff (Tariff 20) will see a bigger increase, in the order of 9%.

And I understand increases here have been driven primarily by higher energy and retail costs.

Nevertheless from our end, as you can see on the screen, our rate movements are relatively consistent with residential customers.

I would like to emphasis the opportunity for our commercial customers to take advantage of new tariff arrangements – they are represented by our retail Tariff 24 in particular, which provides substantial savings for customers on their daily fixed charge and energy usage with even greater overall savings for customers who can shift, reduce or substitute energy use in the summer peak demand window.

Now we did have an advanced query from a stakeholder s who is on the webinar small business tariffs regarding the use of kVA pricing. I can confirm that there aren't any plans at this stage to apply kVA prices which look at a site’s power factor to customers consuming less than 100MWh per annum.

I hope that clarifies that for that particular stakeholder.

SLIDE 13

The next graph is a similar graph to what we did for the residential customers.  You do see some increase in prices from 14-15 to 16-17, however, overall you are seeing a relatively, significant reduction from 14-15 prices.

I think it is time to hand you back to Sara.

We have not had many questions or so if anyone has them please pass them through.  I do have just passed on to Gordon one from  Scott  Bird, which you may want to answer it verbally.

For everyone else’s benefit it is… “Why do you charge different rates for your service fees”.

SLIDE 14

Yes , it's probably a good question.  I think service fees is often a fairly ambiguous term.  Effectively what we do with our tariffs Scott is seek to try and align our overall revenue recovering of our residual charges particularly, from either usage, which is cents per kWh or demand which is cents per kW or kVA, or fixed charges, which is cents per day.

We tend to use different rates for different classes of customer. Rather than apply the same rates for the same customers.  If you are a customer consuming 150GWh per annum you will face a larger daily fixed charge to someone that is consuming 100kWh per annum and we think that is appropriate based on different aspects of equity and neutrality. Thanks for that. And thank you Scott.  We have not got any other questions at this stage I will stress again, don’t hesitate to send them through because we definitely want to keep the conversation to what is of value to you.  So it gives us a bit of guidance of what needs to be explained further.

SLIDE 15

Okay so we will continue on.

I just put a slide in here just to reinforce the message that we have been making changes to our network tariffs as we have gone through the reform process.

For the rest of the session we are going to go into detail on the new demand-based tariffs that we are introducing to the Standard Asset Customer Small group…

And I personally have been very much involved in the stakeholder engagement on this reform and there are a few familiar names on the list of attendees today. So I just wanted to give you the reassurance that your contributions have been invaluable.

Even in the final move at this final stage into 2016-17 we have continued to make changes based on your feedback, some of which is on the screen there.

The main challenge has been on ensuring that the tariffs for this customer group are both cost reflective and able to be understood and utilised by both retailers and ultimately the customer.

So we have made changes, which were in our November presentation for our Tariff Structure Statement  so I will hand you back to Brendon now to walk through these.

SLIDE 16

Thank you Sara.

This will be a replay for many of you who may have been on our Tariff Structure Statement presentation but I think it is worthwhile reiterating particularly as we have many new stakeholders who have not been part of our webinar experience before.

Our Seasonal Time-of-Use Demand tariffs are our preferred tariff, cost reflective tariff for the future, due to their longer term benefits and the overall equity benefits that we see.

Now we are only very early on the journey of introducing these tariffs and we have been working hard with stakeholders to refine the tariffs  so that they deliver what we want them to deliver, but we also deliver what customers want so that they will seek to move on to them.

This has seen us simplify the way the tariffs are calculated for 2016-17.

In response to your feedback, from 1 July this year the demand calculation and the window in which the demand is calculated will be the same for both the summer and non-summer months. Previously the non-summer month demand charge was calculated very differently based on the highest single interval in the month.

Again, the second change in response to your feedback, is we have simplified the demand charge calculation.  Our monthly demand calculation looks at the highest four demand days in the month, determined by the average demand recorded in these daily demand windows. This is a change to the previous approach which looked at the four highest maximum demands in the month and used the average of the demands for those days.

The alignment of the summer and non-summer months and the simplification of demand calculations means that the customer can now focus on the average of the demand the customer uses in the daily demand window to reduce costs.

We are very proud of our approach to the seasonal time of use demand, particularly residential and small business.  We think that averaging is a more moderated demand charging mechanism than using the highest recorded half hourly maximum demand over a period. We think it minimises the bill impact of any abnormally high peak demand days and also improves the likelihood of the period measured coinciding with the network wide peak (because peak demand drives our costs, any opportunity to reduce this demand will benefit all customers).

For these tariffs the rates for the demand charges drop significantly from the summer months to the non-summer months. And our reforms are also continuing to gradually increase the cost reflectivity of the summer charge.

SLIDE 17

Sara can we just go the next slide and we’ll try and quickly gloss over the  demand components of the tariff and how they are calculated.

There are user guides on our website, and I am more than happy to direct customers to them if they do want to know more.

The monthly demand charges, for both summer and non-summer, are based on an average of the demand the customer places on the network in what is called the daily demand window.

For business customers, the daily demand window is the half hours between 10.00am and 8.00pm on weekdays.

For residential customers, the window is the half hours between 3.00pm and 9.30pm each day of the year.

We look at the highest four demand days in the month, determined by the average demand recorded in these daily demand windows. We then apply the monthly demand rate to the average of these top four demand days.

In the non-summer months the rate applied to the demand charge is much lower. The only other difference is that a 3kW floor also applies (non-summer months only) – meaning the customer pays for 3kW of demand or the average of their top four average demand days in the month, whichever is the greater.

Noting that this is for non-summer months only.

The other thing to note, which you may have seen on the previous slide is that there are no distribution fixed charges applying throughout the year, only the floor relating to off-peak demand in the non-summer months.

We also apply a flat energy charge all year round noting that this energy charge is a fraction of the energy charge of the equivalent Tariff 11 rate. The lower rates set in this tariff for off-peak demand and energy means real savings for customers 90% of the time, when tour network is not being used to its full capacity.

SLIDE 18

I will just move to our next slide for our friendly retailers on the line. It is a mock-up of a Statement of Charge that you would receive if you had any of your customers on a seasonal time of use demand tariff.

It will be pretty much the same as it is now.

It does shows the different charges, the DUOS or Distribution Use of System charges for fixed, demand, capacity and volume. It also shows the TUOS for transmission charges, and the Jurisdictional Scheme charges.  Again if you have any queries of what the Statement of Charges mean please feel free to give the network pricing inbox a nudge.

SLIDE 19

Something that I am very proud of and I know Sara is very proud of is the work that is currently getting underway in terms of trialling these new types of demand tariff products for our customers.

We are currently developing this trial, which I think is just known as Tariff 14. And we are looking at some initial work to ensure we can go the next phase to send this out to more customers.

Our aim is to obtain customer feedback on their experience of the tariff. The findings from the trial will be used to help develop future seasonal time of use demand tariffs for this class.

It will also assist Ergon Energy in being business ready to support customers moving to the tariff.

Now, in order to encourage participation in the trial Ergon Energy will ensure that customers won’t be worse off as they try the tariff.

As noted on the slide if they are better off they will be able to keep the savings they make.

If they are worse off Ergon will make good their “loss”… or true up at the completion of the trial.

In other words it is like a bill guarantee.

At present the Activation part of Phase 1 is underway.  And this involves a handful of staff testing with various components of the trial before it is expanded more widely to regional Ergon Energy staff later this month.

We are hoping and anticipate recruitment for Phase 2 of the trial to commence in August/September.

And we are working with our retailer to ensure that this can happen.

We do have a target of 1,000 customers on this and other STOUD tariffs by June 2017. It is worth noting that even though the trial is focussed on residential customers a small number of small business customers will also be invited to trial Tariff 24 so we can obtain their feedback on this as well.

SLIDE 20

As I mentioned, as part of the Tariff 14 Trial we have a small number of staff who are participating in a paper trial of the tariff to allow us to fine tune, and iron out the wrinkles in our processes ahead of launching further into August and September this year.

We are lucky enough to have one of our guinea pigs, Michelle, with us on the webinar. Michelle has been contributing as part of the trial over the past three months and has kindly agreed to discuss her experience on the trial.

I’d like to hand over to Michelle so you can hear from her.

Michelle are you there?

She is on the web cam.

Can you hear me?  Yes we can.

Good morning. I thought I’d give you a quick snapshot of what I look like as an electricity user first.

I have a four bedroom house.  I have a partner but we do not have any children, we both work full time.  So we are pretty much out of the house from 7.30 – 6pm at night.  And despite that we do require a lot of energy around that evening demand time.  We have air conditioning and we live in Cairns and therefore if anybody understands Cairns lately it has been very hot this year, so it has been an exceptional year. We do have a small solar panel system and we have our pool on off peak tariff (controlled load tariff). We have an electric oven but gas cooktop.

So we have used the air conditioning quite a bit this summer due to unseasonally high temperatures. And we do have a lot of entertaining that we do on weekends so, and obviously I have to do all my housework on the weekend too, so what it means is unsurprising to me is my peak load has ended up being on the weekends.

So since I have been in the Tariff 14 Trial I haven’t made any changes in the way that I use electricity. I wanted to see how things would go. ·   The results so far show that I am slightly better off in the non-summer months, so in March and April I come off better.  But in February I did have some impacts on my costs, which is understandable and so what you see is that in February, which is my summer month I had slightly higher charges than I would have had if I was on Tariff 11 – whereas in March and April I had lower charges on Tariff 14.

SLIDE 21

So in the next slide what you will see is my averages for February. So February was a very warm month… and as I said I do a bit of entertaining.  And you can see that these averages amounts relate to that window between 3:00pm and 9:30pm each day.

The two dates that are circles are both Sundays funnily enough.

And they are both the highest day by far compared to other days.  I know on those days I did lots of washing and cooking… and it was very, very warm so I enjoyed my air-conditioning as well. But what it also highlighted to be was that there would be some very simple changes I could have made to those days to reduce the impact in the 3pm to 9.30pm window.  And because it averages over four days, you can see the rest of the days are quite a lot lower.  So just by pulling down those days, these small changes could deliver big savings for me.

With my network hat on, I know that this is about the traffic congestion type of scenario in the network, so I know that reducing or shifting my usage just slightly I can have a good outcome for myself as well as having a good outcomes for everyone else connected to the network

So that is my first up experience and happy to hand back to Brendon.

Thank you Michelle.  That was extremely informative.  I really appreciate the time and willingness to expose your usage of the last few months.

Hopefully you can see from the slides and Michelle’s very helpful comments that with some level of behaviour change in the summer months customers could achieve quite good results on Tariff 14 compared to Tariff 11 and then enjoy some very good savings in the nine non-summer months in which you experience of very low rates. Now we are not in the business of forcing customers off using energy at the times they want to use them.  We simply believe that tariffs reflecting the cost to serve at these times will ultimately give customers control to pay the cost reflective price at these times or reduce their energy at these times, making savings for themselves and the network as a whole.

SLIDE 22

So Michelle can continue do the cooking and do the washing and have the air conditioner all at the same period of time… and I don’t think she would be that much worse off than she would otherwise be in Tariff 11.

Or she could make the decision to move some of that energy outside of those times…

You can see that in the 30 minute intervals that Michelle has provide to us for those two days.  You can see that the beauty of averaging gives Michelle even more control over her usage.

So rather than recording that one half hour of just over 6kW, we average her time over the window, which ends up moving down to the early fours or with the blue line the late threes.

Importantly Michelle could have moved some of those green and blue bars in the grey shaded area either outside of that period or made greater reductions earlier in the day between three and five or between eight and nine so that she could have made greater savings.

Or she could have done nothing and she could have paid a similar price to what she would have normally paid.

This is part of the wonderful journey that we are going to have over the next few years as we try and work out how customers can benefit considerably from these new types of tariffs. The exciting thing from my perspective is that Michelle has already started looking at how she can reduce her bill by looking at the very window that is most likely to contribute to our network charges.

AT THIS POINT WE LOST INTERNET CONNECTION AND THE INTERNET DID NOT RESTORE CORRECTLY. FROM HERE THE RECORDING WAS NOT EASILY DECIPHERED, THESE ARE OUR NOTES ONLY.  THE QUESTIONS AND ANSWERS HAVE BEEN RESPONDED TO IN A WRITTEN DOCUMENT AVAILABLE ONLINE. FROM HERE THESE ARE NOTES ONLY.

You can see if Michelle reduced demand across a few half hour periods, because of the averaging, her demand could be reduced by nearly 1kW and the Tariff 14 charges for the month could be over $40 lower and only slightly higher than their Tariff 11 charges.

I will also stress though that from the initial trial group, that Michelle is part of, the maximum indicative saving is 13% for the three months of the trial and two households are not saving at this stage. So it is still early days in being able to provide details of the types of households and the actions that can be taken to benefit from the tariff.

REMAINING SLIDES

Well that has brought us to the end of what we wanted to cover.

There is all the detail on our website.

The rates we presented today are out of our 2016-17 Pricing Proposal, which we submitted to the AER for approval on 29 April 2016. They will put it on their website, but you can find if on ours now.

It covers all the detail of what we intend to charge for the use of regional Queensland's electricity network in 2016-17. Following AER-approval of the Pricing Proposal, we will send out further advice to retailers and major customers of the final rates applying from 1 July 2016. Our website will also be updated with supporting pricing documents and user guides for 2016-17.

But in the meantime the ones that are there from November when we released our Tariff Structure Statement covering our tariffs out to 2020, are still valid. You can see the documents on the screen.

Or of course we would be happy to go over anything we have covered today with you individually. In the meantime I will now go the questions I have here now….

For questions and answers please refer to the Q&A sheet online with this webinar. Thank you for your interest.

Customers using more than 100MWh a year

100MWh to 4GWh: Standard Asset Customer - Large

You can view the slide presentation (PDF 2.0 mb) (with corrections) or the webinar below.

Transcript

SLIDE 1

Good morning everybody.

Thank you for joining us.  Today we're going to be discussing Ergon Energy network Pricing Proposal for 2016-17.  A special thank you to those who have joined us again after listening to our presentation yesterday afternoon.  This one is a continuation on.

It is fantastic to have the interest that we have had in this series of webinars. Today we have almost 70 registered and I can see, thanks to technology, the numbers logging on now as we get started. So that's truly, really appreciated.

Before we get started, I’ll just give you a quick overview of the webinar process for those of who did not participate in the webinar we had yesterday.

SLIDE 2

When you came on to the webinar you would have seen a panel come up that looks like one that is on the slide now. The control panel.

So I will explain in detail how you to use that but before we do just to give you an overview of the series of webinars that we were covering. This is the second one.  We are talking about network tariff, which is just one element of the electricity bill.

And as the rates and the structures and as a result the impact of our network tariffs are different for different groups, that's why we have split it into the three different webinars.

This one will cover the relevant sections of our Pricing Proposal for customers using more than 100MWh a year, and up to 4GWh – that’s regional Queensland’s large commercial, industrial and agricultural operators.

We spoke about our customers using less than 100MWh yesterday and there will be a recording of that if you miss that and you're interested in that group as well. Later this morning we’ll talk about our prices for the state's largest energy users. They’re the operations that use more than 4GWh a year.

My name is Sara Collins. I'll be joined today by Ergon Energy Manager Regulatory Determination and Pricing, Brendon Crown, many of you are familiar with Brendon… and you hear from him shortly.

But as I said now that we have a few more online I'll just go quickly through the way the control panel works.

If your control panel is blocking your view you can use that little orange arrow to minimise it and then when you want to utilise I you use the arrow again to maximize the arrow.

If you having an issue with audio and no one else is having an issue, you can dial in via the telephone at any time. Just click that and it will give you a phone number to utilise or in reverse if you having issues with your computer, sorry if you are having issues with your telephone you can convert to the computer.

Yesterday, we had an issue with the internet connection dropping out in the last 10 minutes of the presentation, up until then the recording of the presentation was perfect.  But after that we had issues with the computer resetting or the internet issue causing an echo so for the last 10 minutes we haven't been able to resolve that issue.

But, the gods be with us, today the internet of things will deliver a smooth presentation.

For this webinar you, all the participants, yourself, the microphones have been muted.  So I no one else can hear you but that doesn't mean you can't ask questions. You’ll… and I encourage you to… you'll see in the control panel a little cross for questions.  You just click that open and it opens up a section to type in your questions. We again have a panel of people ready to answer your questions as we go through and we will be stopping to answer questions also.

I think that probably covered of all things we need, other than I'll just let you know that I will be doing two polls.

POLL SLIDE

So we’ll move to that now.  This is just to give us an idea of the audience and how much involvement that you've had to date with our tariff discussion.  Now that should have popped up on the screen now, so if you don't mind giving us an idea of the audience that we got online that was would be fantastic.

You have got four options… no exposure until today. Looked at the material online. Attended yesterday's webinar, just to give us an insight as to how many people have returned and how many people are new to the topic.  Or you may have attended earlier webinars or engaged with us face to face, which we have been doing particularly with our peak bodies.

Okay I will close that now. Okay Brendon around half of the audience – thank you very much – attended yesterday’s webinar.  But we do have a small handful that have no exposure until today, so we will recap on some of the background material about our tariff reform journey. Thank you very much for that.

SLIDE 3

Before I hand you over to Brendon I will run through the agenda for today. It should be a little bit shorter, I think then yesterdays. We have got about 35 minutes worth of presentation and then depending on questions, we’ll need about 10-20 minutes for questions.

We’ll start the day, as I said, with a bit of a recap on our reform journey.  Then will provide an overview our forecast revenue requirements, which for those who didn't join us yesterday, they are simply the dollars we have to allocate out through our Pricing Proposal to the different customer groups.

We will look especially at the impact for customers today, as I mentioned, who use more than 100MWh a year.  We’ll then take a break to address questions and after that we’ll discuss the detail of the new demand-based tariffs that we are introducing for the Standard Asset Customer Large group. Okay after that we will close the session and have that extra time for questions.  So with that I will introduce you to Brendon Crown.

SLIDE 4

Thank you Sara

I did mention yesterday that 2016-17 year is an important year for Ergon Energy.

Its represents the culmination of one of the most substantial tariff reform agendas that any distribution entity has made over a three year period.

And it’s at this time that it is worth reflecting how far we’ve come in just three years. For 2013 the tariffs we published (apart from the rates) were not too different from the tariffs we would have published 15 years earlier.

And you and other stakeholders and customers recognised we were well behind the rest of the pack. Acknowledging we needed to change, we also saw an opportunity for Ergon Energy to give customers greater visibility of the impact their use of the network has on cost.

And many of you have been on that the journey with us to make the substantial changes to the tariffs we offer customers, which are now in place.

Now with the introduction of the Tariff Structure Statement, we have established the 2016-17 year as our foundation year.

All of our major reforms we have been progressing to be in place from 1 July this year.

This does include some changes to structures and rates for some of our tariff classes that were approved by the AER for 2015-16.

For those of you who have been on our previous webinars, particularly in relation to the Tariff Structure Statement, it is worth noting that we have not make any additional changes to those we outlined when we released our Tariff Structure Statement and associated webinars in November last year.

Now with our foundation year firmly in place, we plan to keep our tariff structures relatively stable out to 2020 and that is in order to build a greater understanding of the new tariff options and promoting their benefits.

SLIDE 5

I do want to now focus today on the white box that you see on your screen – they’re the network tariffs that get bundled into the final bill you receive from your retailer.

However, because the network part is a big chunk of the total bill, the way we structure our tariffs into different components usually makes its way to the customer through the retail bill.

It is also worth noting now that we have separated the discussion and the focus is on the larger customers so the proportion of the bill will be very different for customers in our commercial and industrial sector.

SLIDE 6

And with that I do want to note that we do have very different customers in our network area and for each of them we do apply very different approaches in terms of structure and rates, given the way they use the network is slightly different.

We did decide to separate sessions for each groups, so I would be very interested to have you feedback on if this is worthwhile or not for you.  Whether you would prefer to get it all at one hit or whether you would just like to have your segment looked at in one webinar.

I know that there are some people that are on the webinar from yesterday so we do not want to overlap but I do know that we have some also some people that were not at yesterday’s session who might want a more focused session for their SAC Large customer class.

The focus of today’s session on the screen is our large customers, our large commercial centres and industrial and mining operations… the L in this diagram.

We have several thousand customers in this group consuming between 100MWh and 4GWh a year.

Now in considering how these different groups are impacted differently by our network tariffs we’ll take a look first at the impact of changes in our total revenue requirement.

In summary, the good news, particularly for retailers is that there are no major changes that applied to SAC-large this year so basically the changes that applied to our tariffs in 2015-16 go forward into the next year. However, there are changes to the rates that we would like to explain and I would like to go over our revenue requirement and how that has been allocated to this customer class in the next few slides.

SLIDE 7

So many of you will know that the Australian Energy Regulator or the AER released its preliminary determination in April last year for our revenue allowance out to 2020.  It set our costs for 2015-16 and future years well below the costs that were experienced in 2014-15.

In October last year, the AER substituted the April determination with several adjustments to financing costs, and allowed expenditure forecasts. This, combined with revenue adjustments for under-recoveries in previous years, increased the revenue we need to recover in 2016-17 by around 1.5% compared to 2015-16 prices.

Of course, as you can see on the screen the revenues we are allowed to recover in our final determination for 2016-17 seem to be still well below what we were allowed to recover in 2014-15.

Now it is important to re-emphasise that our charges are only a proportion of a retail customers’ bill.  The blocks above the dark blue represent transmission and solar costs. These costs are not for our services, and are largely outside of our control as a distribution business, but we do pass them on through our Network Use of System charges.

And we try and pass these through in the least distortionary way.

You will note in future slides, particularly for SAC Large customers that this is seeing some of our tariffs higher as a result of higher transmission charges from Powerlink – its around a 9% increase from 15-16 to 16-17. Because our larger customers tend to have a higher proportion of transmission costs being passed through this will have a larger impact on them than our SAC Small customers.

The good news around the corner from a transmission perspective is that the AER’s final determination for Powerlink will apply to 2017-18 prices.

Now we have news from Powerlink that charges passed through to us are likely to fall around by 25% in 2017-18.  Further to that if we do get a good stream of warm overcast weather for the remainder of the year, we are also confident that we will slightly over-recover on our revenues in 2015-16 and we’ll be able to pass this back to customers through lower prices in 2017-18.

So you can see in our crystal ball we are expecting an overall revenue recovery reduction of around 10% one year out, which should flow through to customers in prices in 2017-18.

Of course, like 2015-16, the impact of these prices overall will affect different customer group’s tariff classes in different ways, and I’m sure many of you on the webinar you have been around long enough to know not to go out and buy the new car you wanted because of forecast reductions. These changes are still subject to change and individual tariff outcomes are likely to be varied from the macro view.  I haven’t even talked about the impact of retail or QCA determinations on this slide.

SLIDE 8

I do want to go into that in some detail without making this a retail or QCA discussion but it is important given some of the big changes that are occurring to many customers out there that are in this tariff customer class.

For customers in Ergon Energy’s network, the majority benefit from prices that are not purely based on our underlying network tariffs.

The Queensland Government recognises the costs of supplying customers in some parts of regional Queensland will be higher and therefore provides subsidies so that many regional customers in Queensland can experience similar prices to other areas.

Each year the Queensland Government delegates this task to Queensland Competition Authority – the QCA - who determines regulated retail electricity tariffs, the ‘notified prices’ that Ergon Energy Retail charges customers in regional Queensland.

No while we do our best to assist in this process, the task of outworking this process of determining regulated retail tariffs is undertaken independently by the QCA, to outwork the Queensland Government’s Uniform Tariff Policy.

Here, the impact of our network tariffs does vary between each customer group.

For our large users, who use MORE than 100MWh of electricity a year, the QCA notified prices are based on the lowest cost of supply in regional Queensland. This represents our Eastern pricing zone.

There are a number of exceptions, and one should reference the QCA website for a better explanation of these arrangements

The rates for these tariffs for 2016-17 will be confirmed by the QCA later in the month. They will consider our Pricing Proposal as the AER finalises these for 2016-17.

SLIDE 9

Now as I said yesterday, I could spend the full hour on regulated retail tariffs, but I will not. I will just make reference to them where it will help you understand how what we are doing impacts our customers in this group who have Ergon Energy Retail as their retailer.

On this slide you can see Ergon Energy’s distribution charges on the left side, or least the charges that apply to our east zone, noting we have three pricing zones, and the equivalent QCA determined retail rates, which includes all the transmission, jurisdictional scheme, distribution and retail prices, and they are on the right.

Our SAC Large customer rates have increased since 2015-16 resulting in a customer impact which is as little bit higher than the revenue increase that I showed before.

I’d like to outline a number of reasons attributing to this.

Firstly, the allocation of revenue to the tariff class has increased compared to other classes. Now our published allocation methodology applies consistently to the different tariff classes to balance allocations across the total revenue requirement.

And part of that normal annual movement in all network tariff classes as part of this process will see allocations between tariff classes increase or decrease. And the revenue allocation to this particular tariff class as a whole has increased marginally.

Secondly, we have also seen a reduction in customer numbers, total energy and demand for this customer class across the board by about 3%.  A number of factors have influenced this, including the forecast take up of our cost reflective seasonal time of use demand rates. What this means is, with slightly more revenue to recover from a smaller customer base, less energy and demand throughout, the unit rates need to be higher.

Finally, SAC Large customers have a higher proportion of the bill associated to Transmission costs compared to other residential and small and medium sized businesses… and so the fact that Powerlink’s charges are increasing by 9% this is probably having a greater impact on SAC-Large customer group compared to the small users.

Noting of course, hope in the future of that reduction from Powerlink in 2017.

SLIDE 10

So I will just take you to a graph that shows our actually customers and modelling of the impact to those actual customers would be on our various types of tariffs. Noting that we have Demand Small, Demand Medium, Demand Large and Demand High Voltage tariffs that apply to our customers on a self-selection basis.

You will note that there is quite a large impact is on our Demand High Voltage customers. And that is mainly because the number of customers in this pool is reducing as we wind down that tariff.

Customer impacts are also noted for other tariff groups as well.  As I discussed yesterday, I am confident we’ll see some reversal of this in 2017-18 when the reduction in Powerlink transmission costs flow through to customers.

I also note that we have not modelled the optional seasonal time of use demand tariff and customers concerned with price changes should contact their retailer regarding their suitability for such a tariff.

I will note again that this is our network use of system charges, it is very different to the impact that customers will see from their notified prices, and the movement of their notified prices between years.

We do have a couple of our Retail representatives and some people from our network area on the line, I know that they are working with some customers who are transitioning from quite heavily subsidised tariffs to less subsidised tariffs and some of the impacts of that.

I don’t plan to into a lot of detail on this in this discussion but if you are experiencing significant concerns with your transition from the heavily subsidised tariffs to other tariffs I do ask you to contact Ergon Energy Retail. Ergon Energy Retail has an arrangement with some of our planning people who have already gone out and undertaken energy audits with the look to alleviate the impact where we can. I might hand back to you Sara at this stage to see if there is any questions?

SLIDE 11

We have had a couple of questions both online and prior to the webinar around introduction of kVA charges for demand… so I know that you will be talking about that a little bit later in the content but if you could just give a little bit of a summary of where that is going that would be great.

Look it is a very good question Sara. I do know that Energex has adopted kVA charging for customers consuming more that 100MWh per annum. Ergon Energy did look into this.  We looked very closely at it. In fact Ergon Energy does have a different network topography and a different type of radial network structure to Energex. At this stage we were not convinced that moving kVA charges to the lower levels of the network, for all customers consuming over 100MWh would be in the long term interest of our network or customers.

So at least for the remained of this regulatory period out to 2019-20 we will not be applying kVA charges to customers consuming below 4GWh of energy per annum.

I know that will end up being a different approach to what Energex has provided and that is not to say that we will not relook at this from 20-21 once we have had a better look at it. I suggest that will be part of our consultation process for the next Tariff Structure Statement, which will apply for the period from 2020 to 2025.  But thank you for the question that was worthwhile reiterating. That is all we have for now. I will just encourage anyone as we go through don’t hesitate to send your questions through.  And I will pass it back to Brendon.

SLIDE 12

Great.  What I would like to do now is quickly go through a recap what we have discussed before in relation to our seasonal time-of-use demand tariff.

Since July last year customers have had the opportunity to access a new tariff that rewards customers for shifting electricity demand to outside of peak times.

Now this is similar to the other SAC-Large demand tariffs already available, however, this tariff incorporates price signals in terms of season of the year, day of the week, or time of day. The structure and the rates associated with each component reflect the cost associated with placing additional demand on the network, especially in the summer months. It provides the real opportunity for real savings for customers for 90% of the time, when the network is not being used to its full capacity.

This tariff actually has already proven quite popular for customers with the tier 2 retailers – those in the competitive market already moving to this seasonal time-of-use demand tariff.

And we are also hopeful that other customers on exiting Notified Tariffs will also look at their suitability of this tariff, which is the new optional Notified Tariff 50, that uses our seasonal time of use demand tariff. There are four components of the demand-based, seasonal time of use network tariff: a peak demand charge in the summer months; an off-peak demand charge in the non-summer months; an off-peak energy charge in the non-summer months; and a fixed charge.

SLIDE 13

If we look quickly Sara at the next slide you can see how the demand components of the tariff are calculated.

The peak demand charge only applies in the summer months and it only relates to demand recorded between 10.00am and 8.00pm on a summer (December-February) weekday. Peak demand drives our costs, so any opportunity to reduce demand in this period (through a customer’s operational changes or investment in technologies like commercial solar or what not) will benefit all customers in the longer term.

A threshold applies to both the peak and off-peak demand charges. This is reflecting the wide scale of customer’s demand in energy that we have in this customer class. During the summer months, the charge is only applied against the demand recorded above 20kW.

Where the monthly maximum metered demand is less than the demand threshold, the chargeable demand for that month is set to zero.

In this example that we have here the customer consumes around 630MWh of energy per annum. We’ve plotted his maximum demand for this customer in the demand window in the summer month of January. And you can see there that the highest recorded demand for this customer was on the 24 of January. At 170kW. The charge is on the 170kW less the threshold of 20kW, against the peak rate.  It is important to note that is not an any time peak demand that is the peak demand recorded in the month on any week day between 10.00am and 8.00pm.

SLIDE 14

For non-summer months, an off-peak demand charge is applied to the demand recorded above a threshold of 40kW.

Sara if you just take us to the next slide.

Where a monthly metered maximum demand is less than the demand threshold, the demand charge for that month is set to zero.

You can see that this customer is a unique customer, or a very different customer and that they have a much higher demand profile in May compared to January.

So we are now looking at rather than 170kW, we are looking upward of 360kW, which we apply to the off peak demand.

So for this customer we take the maximum anytime demand recorded in the month (in this case the 1st of May) and deduct the threshold of 40kW to arrive at an off peak demand chargeable quantity of 320kW. Note the difference for SAC Large customers where we apply an anytime recording of maximum demand in the month for the non-summer month, where are we are particularly focussed on the daily demand window for the summer months for the peak demand charge.

SLIDE 15

If we move to the next slide we have just tried to put this calculation together.

An energy charge rate applies to all energy consumed in non-summer months. In 2016-17, as for 2015–16, Ergon Energy will apply a zero distribution rate for energy consumed in summer months.

Now before we get too many comments you will see on the slide that a rate does exist for volume charges in the summer months, and it is lower actually than the charge for the off peak and that is because even though we apply a zero distribution rate we do pass on through both the Powerlink transmission charges and the jurisdictional charges through a volume rate. So the volume rate you are seeing there for the volume rate for the peak represents purely TOUS and jurisdictional scheme charges that are passed through.

You will see there that a fixed charge applies.

It is worthwhile noting that for some customers there may be changes required to their metering.

The metering and network billing of this tariff does require a smart, remote-read, type-four interval meters. These meters are a prerequisite for eligibility of this tariff.

However, I imagine that many customers already have such a meter on their connection.

You can see that the bill for this customer consuming 630MWh per year can be influenced by the change to demand during the peak period. The aim of this tariff is obviously to incentivise businesses to look to reduce maximum demand in the periods that have the highest risk of future investment. Now I am going to be frank – we have chosen the perfect type of customer for this tariff, and their making substantial savings to the normal tariff in the order of we have calculated of about $16,000 per annum.

But this is probably reflecting that this customer has extremely low demands in summer and much higher demands in the non-summer months.

Now it is fair to say that we do have customer in our network area that actually have that profile. And I think for far too long they have probably been paying more than what they should from a cost reflective basis.

What we are confident of though is that there will be a number of customer that will be able find some reasonable savings, who have flatter profiles, particularly those customers through the use of solar, commercial solar or batteries or a combination of both can seek to reduce their demand charges in those summer demand window. Particularly for those customers who have profiles outside of that demand window in summer.

SLIDE 16

We do have a number of retailers on the webinar and thank you for your time. I have managed to get one of our billing gurus to join our discussion in case there are any concerns.

Adrian has provided us with the retail statement of charge file for SAC larges tariffs that retailers are likely to see.

I am advised that has not changed since last year.

The Statement of Charge files are designed to comply with the Queensland Network Billing Specification. A revised draft of the spec will be sent out in the near future.

As we’ve already mentioned there is no change for the SAC Large structures that you saw last year.

SLIDE 17

I will just quickly move to our analysis of customer impact of the different  customer types through moving from the anytime demand to the seasonal  time of use demand.

Now we have plotted the impact on customers firstly on the annual chargeable off peak demand  and the annual chargeable energy to show the different impacts at different that customers may have. You will see that it is little bit of a mixed bunch and some customers will see some fairly small increases up to some fairly large increases.

But I think it is fair to say that when you look at that graphs there is opportunities for customers to get some benefits out of transitioning to a seasonal  time of use demand type tariff. With the addition of some small changes, particularly in summer months, there are opportunities for big savings that could apply.   We note that this is the customer impact assuming no change in behaviour.

SLIDE 18

Well that really all I have to say today for this webinar for SAC Large.

For those of you who want more information about our tariff reform process you may want to look at our other webinars or look at the other bits of various information we have on our website.

There is a lot of detail there. The rates we presented today are in our 2016-17 Pricing Proposal. We did submit this Pricing Proposal to the AER for approval on 29 April.

I am not sure if it is on their website yet, it certainly is on ours now.

It covers all the detail of what we intend to charge for the use of regional Queensland's electricity network in 2016-17.

Following AER-approval of the Pricing Proposal, we will send out further advice to retailers and major customers of the final rates applying from July 2016.

Our website will also be updated with supporting pricing documents and user guides for 2016-17.

But in the meantime the ones that are there from November when we released our Tariff Structure Statement are equally applicable since there have been no changes since that date.  They cover our tariffs out to 2020. You can see the documents on the screen.

Or of course we would be happy to go over anything we have covered today with you individually.  You can do that be emailing NetPrice@ergon.com.au

In the meantime I will see if there are any questions Sara that we might want to raise with other people on the webinar….

SLIDE 19

Brendon there are just a couple. so if anyone has any additional ones please don't hesitate to send them through.

I have one around the timing for the new tariff to take effect, from Cary Wiyte

Cary, these tariffs are already available to customers. They have been available since 1 July 2015. I know in relation to notified tariffs there may have been some issues in having customers move on to Tariff 50 that was purely in relation to other metering or billing issues with our retailer but I think they're lasting resolved now. Certainly, I know that a number of customers are already on our seasonal time of use demand tariff as Tier 2 market customers and I encourage customers are who are interested to talk to their retailer about what they can offer in terms of a seasonal time of use demand tariff.

And we have another one from Luana McGath about the AER approval process and when that approval is expected.

Luna that is always the million dollar question.  It will be up to the AER to how long it actually takes to approve our tariffs. At this stage we have not received any response or queries from the AER. I am reasonably confident that our prices that we have put forward will be approved purely on prior experience.  We’ve put up our pricing proposal for the last three years that I have been here and are the only changes I think that have been made are changes that we've actually initiated.  So the AER does ask some questions from time to time but I don't think there will be too many changes for what is already in the Pricing Proposal – certainly haven’t received any indication for the AER that the process will be any different to previous years.

The challenge for the AER of course it that they have so many network business all providing their Pricing Proposal all at the same time and they do need to go to a due diligence process and a board approval process. So I think we're pretty close to the actual tariffs that will apply. It’s probably worth contacting the AER if you wanted to get a full understanding about when they're likely to approve the Pricing Proposal.

Okay I have got another question that I will just cut and paste so that others can have a look at it, while Brendon takes a look.  It is from Luana.

Yeah I think Luana is suggesting that there are some customers who have been moved onto the seasonal time of use to demand tariffs and one of them is not necessarily getting as good an outcome as they would otherwise like and I think that Luana’s question is will how long before the customer can move back to the anytime demand tariff.

Now one of the problems that we do have with a seasonal time of use demand tariff is that the tariffs do have a very different rate in summer months to non summer months and so we have to be very careful of customers are wanting to adopt this tariff to enjoy the lower rates in non- summer and then moved to the anytime demand tariff when the rates get a little bit higher in the summer months.

So I think we do have some business rules around when customers can, who move on to the seasonal time of use tariff, when they can move back off again.  And I think I'll take that off line just to show you where the documentation that lies maybe one of my staff who is on the line might be able to give you some more information either directly now or later I don't have the information directed hand but there are for obvious reasons some conditions once you move on to the season time of use demand tariff as to when you can move off.

Okay we just have a couple more questions, but while Brendon is reading those I will actually launch the final poll question so that you can give us some feedback on the webinar.

POLL SLIDE

Some of you have commented on the idea of the series that we had so any other feedback by email for that would be very much appreciated so we can make this work for everyone and I'll just pass it back to Brendon to answer the last couple of questions.

Sure there's a query here from Chris about the electricity costs going up 11% a time and particularly to 2020 and the electricity will increase over 100%.  My understanding Chris that might be referring to the QCA determined rates, which are the QCA's applying particularly for customers on those heavily subsidised transition tariffs.  As you can see from our presentation our network costs are below 14-15 rates overall and I will continue to do so out to 2020.

There has been some pass through of transmission cost that has increased prices for this particular customer segment in this year but I am confident that those rates are still below 14-15 rates are generally and will continue to be so out to 20-20.

I'm also confident that with the benefit of some pass through of over recoveries and from Powerlink at least from our side of the bill, the network side of the bill, we’re providing some relief.

What we might be able to do Chris is we might be able to get your details off line and I'll get some of our guys, Heidi and Brian maybe, to come and understand your circumstances in a little bit more and see whether we can help you with some transition from one tariff to the other if that is the case. We have a query from Sarah. She’s asking whether Tariff 50 is available to the SAC Large customer on HV.  Look my understanding is the seasonal time of use demand tariff is certainly available to customers consuming about 100MWh of energy. It is worth contacting the retailer to make sure that can be the case for you as a customer on Tariff 50. Again we’ll take your details and I'll try and follow that up through Graham or Gordon and possibly the EEQ.  I don't see any reason why you wouldn't be able to move from the existing notified tariff that you're on to but I will clarify that.

SLIDE 20

Okay I think that has brought us to the end if you don’t have any more questions.

I have put in the screen our web address and email address. We don’t actually have your phone number so if you do want us to follow up with some one on one conversation then please send your contact details through.

The next session at 11:30 and that is covering as I mentioned earlier the largest customers … our Connection Asset Customers and Individually Calculated Customers.

Thank you very much for the feedback through the poll.

It was bit stronger today, probably largely due to better audio sounds that we had. 48% are saying it was very useful and another 48% said it was of value.  So that's really, very much appreciated.

I will be sending out the presentations on first. So when we have got them done as a pack I will send them out to all those that have participated and we have a couple questions about the recording of the webinar itself – that takes a little bit longer so I will get them all wrapped up for early next week and send you a link to those recordings as well so that you can go through the content at your own pace. I think that's all we have to pass on, I look forward to speaking to those who are joining our later meeting.  Thank you very much and enjoy the rest of your day.

Customers using more than 4GWh a year

Connection Asset Customers and Individually Calculated Customers

You can view the slide presentation (PDF 5.9 mb) or the webinar below.

Note: Since this webinar we have delayed the introduction of the excess kVAr charge to the Connection Asset Customers until 2017-18.  This is noted in the updated slides. This allows the AER to consult on this reform as part of its consultation on our Tariff Structure Statement.

Transcript

BLACK SCREEN

Good morning everybody. I'm just doing the final little start-ups to get the webinar underway.

Thank you ever so much for joining us for our third and final webinar in this series, we’re discussing today Ergon Energy’s Pricing Proposal for 2016-17.

We have around 50 people registered today and I can see that we already have 28 already online so as we do the introductions I can see that’s continuing to increased.

So we really do appreciate everyone's involvement in this series of webinars.

We are covering our network tariff, for as I said 16-17, which is just one component of the retail bill and as the rates and structures and even impact of a network tariffs are different for each customer group we did decide to do three separate webinars for this series.

This one being our last webinar. So we would appreciate any feedback on that for our future webinars. What we are really trying to do is to give as much transparency as we can to our network prices and how we have gone about the reforms and the rates and the process itself.

This webinar will cover the relevant sections of our Pricing Proposal for our customers using more than 4GWh of electricity a year, which are the state’s largest energy users.

We recorded the two previous webinars, so if you're interested in the other customer groups as we go through you will be able to access those as well. On the screen you should be able to see the slides as we follow through.

Sorry I just have got the wrong one clicked for that. Okay, I have rectified that so should now be able to see the introductory slide on the screen.

My name is Sara Collins and I'll be facilitating today’s webinar and I'm joined again with Ergon Energy’s Manager Regulatory Determination and Pricing, Brendon Crown, and you'll hear from him in a moment.

SLIDE 2

But first just a few of the house keepings for those who are new to the webinar and haven’t participated in the previous sessions. When you join the webinar you would have had a panel pop-up which looks like the one you can now see on the slide.

The little arrow there is so you can minimise that or maximize that to get it out of the way of the presentation, but of course if you want utilise the panel you’ll have to maximize it again using the same little red arrow.  If you have any issues with the audio, and it's just you, we can communicate with each other through the questions panel, then you change from the computer, If you are using the computer to the telephone just by clicking that and it will give you a telephone option or conversely if you having problems with the computer you can change around, sorry the telephone you can change to the computer.

But hopefully will not have any sound issues. The first session went really well this morning as far as sound goes.  Yesterday we did have some problems but all things are back on track.

We have muted your microphone so don't be concerned if you're talking or their is noise in the room around you.  That's been muted so no one can hear. That doesn't mean you can ask questions. In that control panel there is a little questions pane. All you need to do is press on the + to open it up and you can type questions in there.

And we have a group of managers who can answer questions as we go through the session so I encourage you to ask away.  During the session will also ask you a couple of poll questions and again we're recording this session so if you have another colleague or you want to refer back to it again later you'll be able to access the recording of the webinar.

SLIDE 3

Just on to the agenda to give you a bit of an idea of what we will be covering.

It should take about an hour, probably a little bit less than the hour with questions.  We will start with a condensed recap of our reform process – just for anybody who is joining for the first time for this session.

Then will have a look at our forecast revenue requirements which are effectively the dollars that we allocate out to tariffs or to the customer groups through our Pricing Proposal.

We’ll look specifically at the impact here for customers, as I mention, using more than 4GWh per annum and then we'll take a break to address your questions.  After that will discuss excess kVAr charges with some example calculations and then will have a look at the new demand-based tariff that we are introducing for the Connection Asset Customer group.

And finally for the retailers who have joined us today will take a quick look at the statement of charges and then close with some more question time.

So that’s the agenda.

POLL SLIDE

Just so I can get an idea of who we have a line if you would for me please respond to the poll question that we have on the screen there. That’ll just give us an idea of your involvement to date in our conversation about a network tariff reforms.

We just want to know whether you've had any expose till now, whether you've looked at the material online, whether you attended the other Pricing Proposal webinars, which we’ve had –  one yesterday and one this morning – or previous webinars or were part of our face to face discussions.  That will give us an idea of what to focus on as we progress through the webinar.

Thank you for that.

We do have a handful of people there who have had no exposure until now. Brendon will be going over some slides to give you a bit of background but if that is skimming over it and you'd like to know more then please don't hesitate to contact us.

But 36% have participated in the previous sessions in the series, Brendon.

Thank you very much.  With that I will hand you to Brendon to begin with the topics.

SLIDE 4

Thank you Sara. And welcome to some of you who are joining us for the first time, and a obviously welcome back for those of you who are joining us again for our third and last session on our Pricing Proposal to the Australian Energy Regulator.

Our 2016-17 year is an important year for Ergon Energy. It represents the culmination of some of the most substantial tariff reform agenda that any distribution entity has made over a three year period and many of you have been on the journey with us to make the substantial changes to the tariffs we offer, which are now in place.

Now, with the introduction of the Tariff Structure Statement, which we submitted in November last year, we have established the 2016-17 year as our foundation year. What that means is that all of our major reforms that we’ve been progressing over the last few years will be in place from 1 July 2016.

This does include some changes to structures and rates for our CAC class compared to what was approved by the AER in 2015-16.  For those who have been on our previous webinars, it is important to note that we are not making any additional or further changes to those that we outlined when we released our Tariff Structure Statement in November last year.

Now with our 2016-17 foundation year firmly in place, we plan to keep our tariff structures relatively stable out to 2020.  And I expect all of you on the line will be aware that the structures and the rates that our network tariffs have do vary for each customers group.

And on the slide that Sara is going to bring up…

SLIDE 5

… you will see that we have four main categories of those customers groups or tariff classes. And it is why we decided to hold separate sessions for each of our groups. We would be very interested, if you like having separate sessions or whether you would like to have it all to get it out of the way in one bigger longer session.

This is the first time we have tried a separate session for each of our tariff classes… with the ICCs and CACs combined.

Of course, the focus of our last webinar is on our ICC and CAC customers, what we are calling the XL and XXL customers in our network area.

These are the customers who have had the most direct exposure, in terms of changes to their default tariffs over the last few years.

And they are an important class of customer to us.

These customers have always had tariffs arrangements that much more cost reflective than other tariff classes, let’s say for the residential sectors. However, because of their size and impact, any fine tuning of pricing arrangements, to make these tariff classes more cost reflective and efficient, is able to deliver substantial benefits to the network.

We have some members of Ergon Energy’s network planning team present on the webinar, and I welcome them to the webinar.  They have highlighted to me in recent months a positive interaction from many of you, large customers, and the reforms, which benefits the customer and the network.

In summary, there are now no major changes in 16-17 to the tariff structures for ICC customers.

Importantly, there are changes for the CAC class.  From 1 July 2016 our network tariffs for CAC customers will include an excess kVAr charge.

An excess kVAr charge has been operating successfully in the ICC tariff class since 1 July last year.

Our approach over the last few years has been to replicate changes in the ICC class to CAC customers one year later.  So this change to CAC tariffs is generally consistent with this approach.

Now, as we’ve mentioned earlier, with 2016-17 being our foundation year, once the last reforms are made to the CAC class, I do expect that structures for the ICC and CAC classes will remain steady out to 2020. With reforms now discussed at a high level, I’d like to spend a bit of time talking about our forecast revenues before looking at detail at some of our tariff calculations.

SLIDE 6

And you’ll see on the chart on your screen that moving forward our revenue requirements are falling.

This is making it easier to make structural changes without substantially impacting customers, while also keeping our revenues on the same trajectory over the longer term.

Many of you will know, in October as year that the AER substituted its previous April determination with several adjustments to financing costs and allowed expenditure forecasts.

Now this, combined with revenue adjustments for under-recoveries in previous years, increased the revenue we need to recover in 2016-17 prices by around 1.5% compared to 2015-16 prices.

Of course, the revenues we are allowed to recover in our final determination for 2016-17 are still well below what we were allowed to recover in 2014-15.

It is important to re-emphasise that our charges are only a proportion of a retail customers’ bill.  And those blocks above that dark blue represent transmission, and path through costs for the solar bonus scheme. These costs are not for our services, and are largely outside of our control as a distribution business, but we do pass them on through our Network Use of System charges.

Now as a result of higher transmission charges from Powerlink – I think it is around a 9% increase – the overall network charge does increase for some customers. Larger customers in particular, those in this tariff class, tend to have a higher proportion of transmission costs being passed through and this will be reflected in the costs that are being passed through to you.

The good news around the corner from a transmission perspective is that the AER’s final determination for Powerlink will apply to prices in 2017-18.

And Powerlink have advised us that charges passed through to us are likely to fall by around 25% in that year. Similarly, if we get a good stream of warm overcast weather for the remainder of the year, we are also confident that we will slightly over-recover on our revenues in 15-16 and we we’ll also pass this back to customers through lower prices in 2017-18.

So you can see on the graph that we are expecting an overall revenue recovery reduction of around 10%, when you include TOUS changes, one year out, and this will flow through to customers by way of prices. Now a word of warning, like 2015-16, the impact of these prices will affect different customer group’s tariff classes in different ways, and I’m sure many of you have been around long enough to know not to go out and buy the new car you always wanted because of forecast reductions.

SLIDE 7

Of course, these changes are still subject to change and individual tariff outcomes are likely to be varied.  I haven’t even really talked about the impact of retail or QCA determinations yet.

And it would be wrong of me not to mention for customers who have Ergon Energy as their retailer that the effect of our tariffs on their individual bill is driven by the annual regulated retail price determination process, which is somewhat independent of what we are talking about today.

Each year the Queensland Government delegates this task to Queensland Competition Authority who determines regulated retail electricity tariffs, the ‘notified prices’ that Ergon Energy Retail charges customers in regional Queensland.  While we do our best to assist in this process, it the task of outworking this process that undertaken independently by the QCA.

Brendon there appears to some audio issue. It has dropped out. So I will just do a check if Grahame or Gordon could let me know. Okay. I think that should be working again now. Sound back.

My apologise for that hopefully we did not miss too much in that little session.

I will just summarise.

For businesses using more than 100MWh of electricity per year, the notified prices, if you are a customer of Ergon Energy Retail, are typically based on the lowest cost of supply in regional Queensland.

The notified tariff that would apply to ICC and CAC customers is Tariff 48.

At this stage, the structures in the QCA’s notified tariff rates for ICC and CAC customers do not include the recent network tariff reforms of moving to KVA or excess kVAR charges.

Instead Tariff 48 is built on the Ergon network tariff for large customer High Voltage demand, which does not have these elements. Now as part of our reforms we have also announced our intention to retire this network tariff, so it will in the future be necessary for the QCA to select an alternative network tariff.

SLIDE 8

And I am only saying this because you can see that as our reforms have progressed, there is a widening difference between the structure of the underlying network tariff we have been developing – one that is focusing more to kVA – and structure of notified tariff QCA applies to customers consuming more than 4GWh of energy per annum.

Now our plans to retire the HV Demand tariff, saw us respond to the QCA’s recent Consultation Paper. We actually suggested that the QCA consider:

  • Changing the network tariff that underpins Tariff 48, to reflect our published CAC network tariffs, which are based on different voltage levels and
  • Introducing a new regulated retail tariff or tariffs that aligns with our seasonal time-of-use demand tariff for CAC customers. This would not only move customers to a more cost-reflective set of tariff rates, it would also provide more choice of notified tariffs.

The QCA have considered these changes. However, given the potential impacts on customers, the QCA believes that further consultation is required.

So I know this can be frustrating for many customers and stakeholders, I have had a few queries from stakeholders before the webinar about the status of kVA pricing for ICC and CAC customers on a notified tariff.

All I can say, if you are an ICC or CAC customer who has Ergon Energy as their retailer, you will be subject to the QCA gazetted retail tariff, which, at least today, does not reflect many of the cost reflective tariffs we have developed over the last few years.

I don’t have any further information on this… but if I was a customer I would NOT necessarily assume that these arrangements will continue to exist.

The timing of change, however, is really a decision for the QCA.

Now I could spend the entire rest of today’s presentation on regulated retail tariffs, but of course it isn’t the intended focus.

Because of the situation I have just discussed, if you are on a QCA tariff, much of the rest of the presentation will not be directly relevant for you – at least for now.

However, if this is the first time you have considered the changes we are talking about, I encourage you to listen on as things may change in the future for you.

SLIDE 9

The next few slides will be directly relevant to any customers who have a market contract.

I also suggest you access the network reform material we have online.

In addition to the guides that we published  when we released our Tariff Structure Statement in November last year, that detail the reforms that we’ve been talking about, there is one that explains why we are aligning our charges to the total power demand that a customer places on the network.

We have also discussed this in previous webinars, which are also online.

Look… before we go on, I might hand back to you Sara to see if there are any initial questions.

No we had answered some early one but I had one question that was passed on prior to the webinar, one of the advanced questions from Paul Stuart….

“What options are there for tariff structures to be negotiated or is it all fixed.”

Thanks Sara, and thanks Paul for your question. It is a question that does get raised quite often. The process that we are going through at the moment is developing a Pricing Proposal to the Australian Energy Regulator. And that Pricing Proposal must meet certain criteria and conditions…once the AER approves those prices those prices are published. Because those prices are firstly proposed, then approved, then published, the ability for us to change those structures or rates once they are published are is not available to us.  That does cause some frustration and concern from our connection guys and some of our customers but that is the process that we go through with a fairly highly regulated standard control service.

We also had another question from Paul in Townsville about the 10 year trend in pricing.

Yeh, Paul again a fairly good question. The challenge that we often have is that the process in which we are allowed to recover revenues happens in a five year cycle. And that five year cycle began in 2015-16. At the end of each five year cycle is what is called a determination process or what is commonly called a revenue reset.  What we can often do is give you a fairly good indication about where prices are heading for the five years, but because that reset is quite substantial once you hit the fifth year it is often very difficult to say what the prices will look like after the end of the reset.

SLIDE 10

As we get closer to the end of the determination process our ability to forecast even out five years becomes difficult because it is very much in the hands of the regulator what prices might look like.

Never the less we can may be have a look at what longer term pricing does look like particularly for ICC and CAC customers.

I hope that has answered your question Paul.

That is all the questions we have now. I should point out that with that one in your discussion it was a discussion about network pricing not the broader pricing inputs.

Yes. So I will hand it back to you to move on to the discussion about the kVAr, the excess kVAr charge.

SLIDE 11

Thank you Sara.  I think that is a nice segue way into some of the new different changes to what we have implemented for our largest customers.

Many of you will know we introduced an excess kVAr charge in 2015-16 for ICC customers to improve cost reflectivity of our charges.

There are no changes to the structures and rates that apply to ICC customers. However, we expect to introduce similar charging parameters to CAC customers from 1 July.

Essentially this charge reinforces the price signal for the CAC customers that we gave in 1 July last year when we introduced by the change to the kVA tariff.  You see both the kVA charging and the excess kVAr charges give the appropriate signals to customers to improve power factor and reduce their usage of network capacity.

A premise’s power factor is important because distribution systems must be designed to supply the actual power required.  A low power factor means actual power delivered will be unnecessarily high.

The excess kVAr charge is to be applied against kVAr used by a customer that exceeds what we are calling a permissible quantity. This is calculated by assessing what they would be entitled to use at their minimum compliant power factor while operating at their authorised demand.

A rate of $4 per excess kVAr was applied in 2015-16 and we have decided to retain this rate in 2016-17.

This structure is designed so as to provide a network signal to the customer, it is not necessarily there as a penalty.

In 2016-17 CAC market customers will see the excess kVAr charge.

SLIDE 12

On this slide we set out a simple example to illustrate how the excess kVAr charge works.

Firstly, the permissible quantity is calculated by Ergon and customers and their retailers advised. It is calculated from the customer’s Authorised Demand.

In this example… based on a compliant power factor of 0.95, operating at the authorised demand level of 26,000kVA the permissible quantity is calculated at 8,118kVAr.

Next, the kVAr level for the month is derived from the peak kVA and coincident  kW level – in the example the kVAr level is calculated at 13997kVAr.

The $4 charge is applied to the excess of 5,878kVAr, as shown, resulting in a charge of $23,512 for the month.

SLIDE 13

The next slide shows where the excess reactive power charge may fit in the overall statement of charges for a customer.

Now where a customer’s kVAr usage is less than the permissible quantity, no charge will be applied for this line item on the monthly bill. This would, of course, indicate that it is likely the customer’s power factor is within appropriate limits.

For 2016-17 new rules are proposed for embedded generators, who are also classified as a CAC or ICC for their load connection.  We have observed when charging for the CAC or ICC load, the kVAr component may contain a contribution from the generator.  And this has the potential to increase the total kVA and excess kVAr billing quantities.

Now it was never the intent of load side kVA charging for demand and excess kVAr to include this generation impact.  So in 2016-17, for the purposes of network billing for loads, we’ll adjust the kVAr level to remove the generation contribution where that becomes an issue. If we move to the next slide Sara.

SLIDE 14

Similar pricing arrangements will now apply for CAC customers.

Let’s assume this customer has an authorised demand of 2,000kW and a monthly actual demand of 1,300kW.  This customer consumes around 4.8GWh per annum, an average of 0.4GWh per month.  Because this customer connected to the network after 1 July 2010 and fully contributed to their connection assets up front there is no connection unit charge applying.

Similar excess kVAR pricing arrangements outlined above would apply to this CAC customer.  However, for this customer the kVAr level of the month is below the permissible quantity so does not incur an excess kVAR charge. You can see from the calculation from the slide that this customer will incur charges of around $382,700.

SLIDE 15

I would now like to move onto the optional tariff that we are now providing our CAC customers.

Existing anytime demand CAC tariffs do not provide any signal to customers in terms of season of the year, day of the week, or time of day.

And before 2015 this was impossible to do. Like ICC tariff customers, CAC customers were on individual tariffs. We did change this last year when we made changes, which allowed us to standardise tariff rates for CAC customers.

And as a result of this we are now able to offer the option for customers to adopt more a cost reflective tariff using similar seasonal, time of use demand pricing structures to what is offered to other tariff classes. And those of you on other webinars would have seen this in operation.

Now, these changes did apply from July last year and are available to CAC customers now. However, there are some changes to the structure of our CAC STOUD, which I would like to emphasise for you now.

When we introduced the STOUD, seasonal time of use demand tariff, in July 2015, the summer peak demand charge was based on the greater of the authorised demand and monthly maximum demand during the peak period.

This will no longer be the case from 1 July.

Instead, the peak demand charge which applies in the summer months will be based on the customer’s monthly maximum kVA demand actual demand recorded between 10.00am and 8.00pm on a summer weekday.

Secondly, the capacity charge is no longer charged on the greater of a monthly floor and the monthly maximum demand during the non-summer months. From 1 July 2016-17 the capacity charge will be based on the greater of the customer’s authorised demand and the actual monthly half hour maximum demand.

The capacity charge applies for all 12 months of the year. Over the summer months, it does excludes demand occurring during the peak demand window of 10.00am to 8.00pm on summer weekdays. The off-peak energy charge which is applied to all energy consumed in non-summer months and the connection unit charge remain consistent with what applied to the CAC STOUD last year.

SLIDE 16

Let’s look at an example of the same customer that we used a couple of slides back. We can see in this example the possible impacts of a summer, non-summer STOUD bill using similar  assumptions.

Separate calculations are shown for the customer’s typical summer month and typical non-summer months.

In this monthly example you will also note the customer’s reduced actual demand during the summer peak period below the annual average.

Based on three summer months and nine non- summer months the customers annual bill on the STOUD tariff is around $351,000, a reduction of around $31,000.

We have modelled our CAC’s based on the 2016-17 anytime demand and STOUD tariffs with 33% modelled of the customer we have modelled appear to be better off on the STOUD compared to the anytime demand tariff.

So in other words our analysis is suggesting one in three customers can achieve savings with no change in behaviour. In addition we have analysed that 20% of those may be better off by 10%.  So a one in three better off with no change in behaviour and one on five better off by more than 10%, and no change in behaviour.

Those figures would obviously improve to the extent that customers can change their behaviour in those demand windows. And of course the excess kVAr charge remains at zero as the kVAr level is below the permissible quantity in this example.  Those excess kVAr charges would remain the same irrespective of whether it is an anytime or STOUD tariff.

SLIDE 17

Now, we do have a number of retailers on the webinar and welcome again.  For your purposes, I have managed to get Adrian to join our discussion.

Adrian is our guru in billing and he has provided us with the likely retail statement of charge file for CAC tariffs that retailers are likely to see.

The statement of charge files are designed to comply with the Queensland Network Billing Specification, a revised draft of the spec will be sent out in the near future.

As we’ve already mentioned there is no change that you would have seen from ICC structures.

For CAC we have obviously added a line item/component for the new Excess kVAr charge. We have also adopted a new acronym, the NDERPC. Which is the Network DUoS Excess Reactive Power Charge and that can be seen on the top section of the slide.

SLIDE 18

This following slide indicates how the CAC STOUD components will be included in the statement of charge file; it includes both peak and off peak line items for energy and kVA demand. The excess kVAr line item is also included.

SLIDE 19

That has brought us to the end of what we wanted to cover. I do acknowledge there has been a lot of detail I our presentation and I think many of you will probably benefit from replaying this once it on the website.

Particularly those of you who may be interested in looking at the difference between an anytime demand and a seasonal time of use demand tariff.

Hopefully I have balanced the need to get through a detailed presentation in a reasonable quick time with the complexity of what we have done.

There is plenty of detail on our website.  We will be publishing this webinar on the website. There is further examples of the excess kVAr charging on our website.

And some of the forms that are on our website are there.

We have submitted our Pricing Proposal to the AER for approval on 29 April 2016.

I am not sure it is on their website yet, but it is certainly on our website.  We are more than happy to show you where it is if you need assistance.

Following AER-approval of the Pricing Proposal, we’ll send out further advice to retailers and major customers of the final rates applying from 1 July 2016.

Our website will also be updated with supporting pricing documents and user guides for 2016-17.

In the meantime, the user guides and Tariff Structure Statement from November, covering our tariffs out to 2020, are still valid.  And you can see some of those documents on the screen.

Of course we would be happy to go over anything we have covered with you individually.

In the meantime, I will now go to questions ….

SLIDE 20

Thank you Brendon on behalf of everyone I will thank you now for your efforts because, having been here, it has been a bit of a workload to get three whole sessions organised, and going through all the content and separating them out… but I really think that has removed some of the complexity without having the overlap of the different customer groups.

We only have one question to answer – and this one if from Bruce Iliff:

“In a situation where a customer’s power factor correction unit is out of service for maintenance, or contingencies, will there be some relief from the excess kVAr charge”

So I'll cut and paste that into the chat panel, so everyone can see that while you answer that.

Yeh, look Bruce, I think we've been discussing similar issues with you and some of the customers you represent for some time.  There are obvious balances between providing broad-based tariff signals and specific instances for customers who may choose to manage their power factor in different ways and we have been in discussion with that several of your clients I think of relation to this. Probably the best way to deal with this is probably to discuss this offline but if other people are interested in the response to this query we may include it in a future tariff guide if people have got some concerns.

I know we have had particularly concerns with several customers who have embedded generation because often on start up of the embedded generation that does have an impact on the kVArs that are delivered.

And that follows in to Paul’s question, Paul Trayner:

“Can Brendon provide an example of the events when embdded generation will absorb kVArs by request and not be charged.  We may be importing kWhs”

Yeah, I'm wondering Sara whether maybe we could put this to Grahame Foulger who is on the line or possibly Trevor Gear, I don’t know if Trevor's on the line he is one of our planners.

Grahame I have just unmuted you, and Trever I have two for you that I will unmute as well.

Hi. Yeah look the change we are talking about is to at anytime that there is a transfer of energy into the Ergon Network that the generator contribution to the kVAr component that would be reduced to zero. Because if not in an interval you can see the actual kVA and the ecess kVAr charge could go up like literally by factors of in the 1,000s I guess.  So that change is proposed and I note that's also the practice of Energex.

Thank you Graham. Trevor did you have anything add I am not sure I have got your mic working.

No.

So we just have a further question here about the power factor. It is:

“Our power factor is currently .8. We're currently doing work to correct this to bring it up to .9.8 Will the excess kVAr charge commence for my company on July 1 2016.”

That is from Ben.

Yeah Ben.

I think this is a particular circumstance that we may be better off taking off offline.

I'd imagine if you're in existing ICC customer that the excess kVAr charge would already be applying. The power factor is actually relative to the authorise demand and it actually related to the permissible quantities that you're allowed to have.

So I would need to look at the specifics of your particular customer. So Sara I think, unless Grahame is wanting to answer that online I think we're probably better off may be dealing with that particular circumstance and the specifics of that at a later point.

I was just going to say the first question would be if that site was on a notified tariff, the charge would not be applying. If they’re a market customer it would. I agree with Brendon you would need to look at the specifics and it would largely swing around the permissible quantity and your performance at your site compared to that.

Great.

I will just request Ben if you can give us your contact details we can have a conversation with you off line.

Okay we have just got one last question from Paul Trayner:

“Is there an opportunity to have a non automatic access standard, for example a negotiated standard requirement for compliant power factor.

Look Paul raises an example of a number of issues that we tend to have with individual connections within our network. Like we have a number of different types of different customers in our retail area that want to connect differently and use the network differently we are put in a position as a network business to develop broad based prices and broad based pricing signals.

Now sometimes there will be a need to apply those broad based pricing signals in a way that may not necessarily match particularly connection requirements with the customers. So I would imagine in relation to the customer connection agreement there may be specific conditions that are applied, but that is probably a different issue to the extent to which the excess KVAr charge will apply.  Paul if we can provide some other information I would be happy to look at that.

What I do know is that in some circumstances people have tried to confuse the issue of what we do to establish the connection and how we price that connection.  So in a broad response the excess kVAr charge is there to provide an appropriate signal for customers to improve their power factor. Connection arrangements are there to deal with specific circumstances of the customer, which may or may not deal with the power factor correction that is required under the national electricity rules. They are dealt with fairly mutually exclusively, but they are both there to achieve a common purpose.

POLL SIDE

I will ask a question back to you all now. Just that poll question to bring us to the close of the webinar. If you could answer that just to give us some feedback on how the session has met your requirements.

And we just have one further question from Peter Harris that we can finish up with around tariff reviews.

Peter has raised the question: “Can you go over the best way to carry out a tariff review for a site. A Townsville plant with 10GWh of consumption per year and 4MVA connection.” Peter I think what you will find is that there are brokers and intermediaries out there that will offer that type of service for you.  What I suggest if you are struggling to get anyone to assist you out in there we may be able to get someone from our team to come out and see how we can help you do that. If you provide your details to Sara on the screen we may be able to see if we can get one of our Channel Partnership people out there to assist you with how you might be able to improve your power factor compliance or you kVA or MVA outcomes. And hopefully be able to give you an overall better outcome for your customer.

SLIDE 21

Okay. Thank you very much for the feedback through the poll. A third of you found the session very valuable and another two thirds said if was of value so that is really, really good feedback.

We do appreciate that it is a complex topic and it is difficult not being a one on one to go through every scenario. So any feedback you have, we are more than happy to take it on board.

And if you are looking for further information also don’t hesitate to have a look either on the website, which I have added to the screen now, or if you have specific enquiries you can send it through to the email you have there – futurenetworktariffs@ergon.com.au

Well that brings us to the end of the session.  As I said we will be recording and we will email out the slide pack so that you have the detail to go through at your leisure. Thank you all very much, especially the new comers and those that have gone through the three sessions in this series.  Thank you and enjoy the rest of your day.

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